Impact of Domestic Demand on the Global Value Chain Position of Manufacturing: Evidence From a Cross‐Country Analysis

ABSTRACT This study examines how domestic demand affects manufacturing global value chain (GVC) positions using OECD input–output data. The findings indicate that domestic demand significantly enhances GVC positioning, particularly in developing countries and non‐knowledge‐intensive sectors. These mechanisms include promoting research and development (R&D) innovation, improving factor allocation efficiency and enhancing institutional quality. Moreover, domestic demand expansion strengthens the GVC positions of both the upstream and downstream industries through industrial linkage effects. Finally, this study examines the moderating effects of industrial specialisation and demand diversification. Overall, these results highlight the multifaceted impact of domestic demand on fostering high‐quality GVC participation.